Workplace and State Pensions
Whether it’s a pension provided by a workplace, the government, or one a consumer has set up themselves, the majority of consumers will have a pension. Pensions are basically an investment that you pay into on a regular basis. The intention is for this investment to supply you with an income after you decide to stop working. However, things can be a little more complicated than that – a lot depends on the type of scheme you’re using.
In this guide to pensions, we’ll explore the finer details of workplace and state/government pensions and identify some key points to note regarding your rights – and some common problems to watch out for.
Who can help?
Your first port of call with any pensions issue should be to use Resolver to raise your issue directly with the provider of your pensions. If they're unable to resolve your issue, you can use Resolver to escalate your complaint!
Depending on the nature of your complaint, your issue may need to go either the Financial Ombudsman or the Pensions Advisory Service and Pensions Ombudsman – it can get fairly complicated, but generally speaking the rules are as follows.
If you'd like to raise an issue with your pension provider, you can get started here.
Complaints about personal (private) pensions and mis-sold schemes will go to the Financial Ombudsman. These include your SIPPS and Income Drawdown schemes etc. Complaints about workplace and government/state pensions go to the Pensions Advisory Service and Pensions Ombudsman.
Seems simple enough, but there's an exception. Any complaints about mismanagement or administration of a pension will go through the Pensions Advisory Service and Pensions Ombudsman – even if they're about a personal pension.
This can be confusing, but don't worry! The Financial Ombudsman and Pensions Advisory Service work together to direct your complaints to the right place. This means you'll be sure to get your issue heard, regardless of where it's sent.
Most employers will offer a workplace pension scheme. With these schemes, a contribution will be taken from your salary. In addition, your employer has to pay a minimum contribution into your scheme. You’ll get tax relief on these schemes, making it a great way to save for retirement.
However, your employer currently doesn’t have to contribute if you earn these amounts or less: £490/month, £113/week, £452/4 weeks.
If your employer runs a workplace pension scheme, they will automatically enrol you if you aren’t already in a workplace pension, are over 22, are not yet retired, earn more than £10,000 a year, and work in the UK.
It’s worth knowing that you don’t have to be part of the pension scheme if you don’t want to. You always have the option to opt out.
If you change jobs, you can choose to leave your pension behind in your old employer’s scheme to be paid to you when you retire or transfer your rights to a new scheme.
Joining a workplace pension scheme normally means that you'll end up taking less money home at the end of the month. Even so, this may: mean you're entitled to tax credits, mean you're entitled to increased income benefits and mean you must pay less in student loan repayments.
If you’re made redundant, you won’t be able to pay any more into your employer’s scheme.
You can either transfer the money into a new scheme, leave it to sit in the old one, or, in some cases, take early retirement.
Normally, it’s only advisable to take your money out of the old scheme if you think your old employer might go out of business.
You may choose to opt out of a workplace pension scheme. If you choose to opt out within a month of being automatically enrolled, you should be refunded any money you’ve paid into the scheme. You won’t, however, be entitled to any contributions your employer has made.
Your employer is not allowed to try and force you to opt out of a workplace pension scheme. If they do so (or otherwise discriminate against you), you have the right to complain.
If you are part of a workplace pension scheme and your employer decides it either cannot or does not want to continue to pay its contributions, your employer can decide to “wind-up” the scheme.
The people managing the fund will set a date after which you won’t be able to get any benefits or pay into the scheme.
Your employer must give you a notice period and keep you advised as to any developments.
You can choose to transfer your funds to another scheme, or potentially take a refund of your contributions to the scheme.
In some cases, a business will wind up a scheme because it is going out of business. In these cases, you may be able to claim compensation from the Pension Protection Fund.
Your state or government pension is a regular income paid out by the UK Government after you’ve reached the appropriate age. Your pension is partially paid for by your National Insurance contributions.
Typically, if you’ve reached your State Pension Age (SPA) on or after 6 April 2016, you’ll need 35 years’ worth of NI contributions or credits to get the full State Pension.
If, however, you reached your SPA before this date, the old rules apply to you – you’ll get a Basic State Pension (BSP), which is set by the government every year and depends on your National Insurance contributions, and an Additional State Pension, which depends on your earnings and isn’t available if you were self-employed. When you reach the age of 80, your State Pension is automatically increased by 25p a week.
If you reach your SPA and decide that you don’t want to take your pension immediately, you have the option to put off taking your pension. This will increase the amount you get when you do take it (since you’ll be claiming your pension over a shorter amount of time).
In the unfortunate event that you pass away before your partner, they may be eligible to claim Bereavement Support Payment, which normally comes as a lump sum and 12 monthly payments. You’ll receive more if you have any children who are dependent on you and if you paid more National Insurance contributions.
If you reached your Standard Pension Age (SPA) before 6 April 2016, some of your basic state pension and additional state pension may pass to your partner if you pass away. If you’re due to reach your SPA after 6 April 2016, the amount that passes over to your partner will depend on when you are due to reach (or have reached) your SPA. If you’re both due to reach your SPA after 6 April 2016, your partner will inherit 50% of any protected pension you have. If only one of you is due to reach your SPA after 6 April, the rules are different – you might get more if your partner has paid more National Insurance contributions. If you’ve lived abroad, the amount of State Pension you get may be different. In addition, you should be aware that the amount of National Insurance contributions you’ve made will affect the amount you of pension you’re eligible for.
If you claim a pension and move abroad, your pension payments may be affected by any bank holidays in the company you’re now a resident of.
You should be aware that if you choose to opt-out of receiving Child Benefit, you should make sure to fill out the relevant forms to fill any gaps in your employment record.
If you don’t do so, you should be aware that this may negatively impact the number of “qualifying years” of National Insurance contributions you’ve made.
This could mean that you lose out on a significant proportion of your State Pension.
If you are concerned about this you can check your National Insurance record using the www.gov.uk/check-national-insurance-record site.
If you’re on a low income after retirement, you may be eligible for Pension Credit to help you make ends meet. This will increase your weekly income to £159.35 if you’re single or £243.25 if you’re a couple.
If you reached State Pension age before 6 April 2016, you could get up to £13.20 a week extra in Savings Credit if you’re single or £14.90 if you’re a couple. You’re eligible for this extra money if you’ve got some savings or have an income higher than the basic State Pension.
These rates are due to change from 1 April 2018 – you’ll get £163 a week if you’re single and £248.80, and with £13.40 a week in Savings Credit and (£14.99 for couples).
Pension Credit also means you’ll get other benefits, including: council tax exemption; free NHS dental treatment, spectacles and travel to hospital; Cold Weather Payment to help you keep the heating on when the temperature is 0°C or below for 7 days in a row; rent assistance or help with mortgages and service charges.
You may also be eligible for money to pay for any carers who help you (up to £34.95 a week).
If you believe your benefits are being incorrectly calculated, you can complain to the Pensions Ombudsman.
You can raise issues with 41 companies in Pensions (Workplace or government/state) services
Key companies include: